New Delhi, October 15: The International Monetary Fund (IMF) in its report World Economic Outlook (WEO) report on Tuesday slashed India’s growth projection to 6.1 per cent in 2019.
It stated India’s economy is set to grow at 6.1 per cent in 2019, picking up to 7 per cent in 2020.
“The downward revision relative to the April 2019 WEO of 1.2 percentage points for 2019 and 0.5 percentage point for 2020 reflects a weaker-than-expected outlook for domestic demand. Growth will be supported by the lagged effects of monetary policy easing, a reduction in corporate income tax rates, recent measures to address corporate and environmental regulatory uncertainty, and government programs to support rural consumption,” the IMF report said.
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It further said that in India, monetary policy and broad-based structural reforms should be used to address cyclical weakness and strengthen confidence.
“A credible fiscal consolidation path is needed to bring down India’s elevated public debt over the medium term. This should be supported by subsidy-spending rationalisation and tax-base enhancing measures. Governance of public sector banks and the efficiency of their credit allocation needs strengthening, and the public sector’s role in the financial system needs to be reduced. Reforms to hiring and dismissal regulations would help incentivise job creation and absorb the country’s large demographic dividend. Land reforms should also be enhanced to encourage and expedite infrastructure development,” the outlook stated.
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India’s economy decelerated further in the second quarter, held back by sector-specific weaknesses in the automobile sector and real estate as well as lingering uncertainty about the health of nonbank financial companies.
However, the report said in emerging and developing Asia, it is expected to remain at about 6 percent through the forecast horizon. This smooth growth profile rests on a gradual slowdown in China to 5.5 per cent by 2024 and firming and stabilization of growth in India at about 7.3 per cent over the medium term, based on continued implementation of structural reforms.
